Frequently I state that the commission an online travel agency (OTA) like Expedia and Travelocity takes in a hotel booking is about 20 to 25% of the room rate charged to the consumer. Hotels pay the OTA for their room bookings. The consumer rarely gets a cheaper room through the OTA compared to the hotel chain’s website.

This is the reason why most chain hotels do not offer loyalty program points or promotion credit for bookings through OTAs. And this is why the hotel chain can afford to run high-value points bonus promotions to drive bookings through the chain’s website. The consumer receives hotel loyalty program benefits rather than the OTA taking profits from the hotel for hotel rooms. OTAs generally do not give the loyalty program member the rebate value available through direct bookings with the hotel chain.

An article fromHotelNewsNow.comstates the OTA commission has gotten smaller with brand hotels paying about 15% of room rate and independent hotels about 20%. Online travel agencies do not have the bargaining power in 2012 as the global hotel industry has picked up and room rates have climbed higher.

Another potential change for 2013 is rate parity between OTAs and hotel brand websites may be ending due to “price-fixing” lawsuits in Europe.

All the hotel chains offer Best Rate Guarantees and so do the online travel agencies. The fixed hotel rates make Best Rate Guarantee claims a valuable discount for my travels since most chains discount a valid rate discrepancy by taking 10% to 25% off the lower rate.

What will be the effect on hotel loyalty programs if online travel agencies can undercut the hotel chain’s own room rates?

Seems to me like the hotel loyalty promotions would have to get better to keep consumers booking directly with the hotel chain rather than booking lower rates through online travel agencies.

2 Responses

I too wonder about the affect.. That said, I’ve rarely been offered an OTA rate (on *exactly* the same terms) that is any better than I can get from the hotel’s website and/or talking to their LOCAL, in-house booker (not their ‘national’ reservations office. For those who visit the same cities and hotels on even a semi-regular basis, my advice is to call or email a known contact at the specific hotel, tell them what you need -and don’t need – and allow them a day or two to make their best offer. It rarely fails, especially when I have the name, email address and phone number of the reservations guru *In that specific property*. If you have a track record with the house, they will make it work. Please be reasonable about this! If you are cold-calling and they have never seen you before, an OTA may be the place to start. Once a short history is established via OTA booking, you have some leverage with the house itself. Without some history, don’t waste your time – or theirs. If you are or will be come a frequent guest in a particular hotel, establish your frequency and then introduce yourself, using the OTA costs as a way to open the conversation. And lastly, for heaven’s sake, be reasonable! No one is going to sell you that $250 room for $50, even if you stay three nights a week for the entire year! Not gonna happen. However… with a frequency like that, the hotel probably WILL manage your local wardrobe, laundry; provide some storage and see that your own goods are in your room, clean and pressed – and before you walk into the lobby. And lastly, if one achieves an arrangement like the above, don’t forget to spread a few tips! Find out who really does the work that supports your needs and spend a little green stuff! It works.